Rule 1: Start Roth Conversions at Retirement, Not at 70
The biggest RMD planning mistake: waiting until you are 70 to start Roth conversions. The 10-year conversion window begins at retirement when income drops — not at 70. Starting at 62 instead of 70 gives 8 more years of compounding on converted funds and 8 more years of RMD balance reduction.
RMD rules of thumb with key exceptions
| Rule | The Guideline | Key Exception |
|---|---|---|
| #1 Start conversions at retirement | Begin at retirement not age 70 | If conversion rate = expected RMD rate: no urgency |
| #2 Use QCDs for all charitable giving | Direct all donations through QCD after age 70.5 | Donor Advised Fund needs upfront contribution — not always QCD-efficient |
| #3 Never miss an RMD | December 31 deadline is absolute | No exception — penalty is never worth it |
| #4 Withhold 20-30% from distributions | Default 10% is never enough | If you pay quarterly estimated taxes separately |
| #5 Target IRA balance for manageable RMDs | Size IRA to fit within desired bracket | Very charitable retirees can use QCDs to manage oversized IRA |
Rule 2: QCDs for All Charitable Giving
After age 70.5 any charitable dollar directed from your IRA via QCD is better than donating post-tax dollars. A QCD reduces your AGI at your full marginal rate. Donating from a taxable account only generates an itemized deduction (and you may not even itemize). The QCD is almost always superior.
Donating $10,000 via QCD: reduces AGI by $10,000, saves $2,200 at 22% bracket, costs nothing out-of-pocket. Donating $10,000 in cash: no AGI reduction (unless itemizing), may not exceed standard deduction threshold, costs $10,000 from after-tax accounts. QCD wins clearly.
Donation method comparison for charitable retirees
| Donation Method | $10K Donation | Tax Impact | Net Cost to You |
|---|---|---|---|
| QCD from IRA | $10,000 to charity | AGI reduced by $10,000; $2,200 less in taxes | $7,800 net cost ($10K RMD minus $2,200 saved) |
| Cash from checking | $10,000 to charity | Itemized deduction (if itemizing) | $10,000 net cost |
| Stock donation | $10,000 appreciated stock | Avoid capital gains tax; get fair market deduction | Avoids embedded gains — comparable to QCD |
Rule 5: Size Your IRA for a Manageable RMD
Target an IRA balance at age 73 that generates RMDs fitting within your desired tax bracket. For a 22% bracket target: identify your 22% ceiling after Social Security and other income; divide the remaining room by 26.5. That is your maximum IRA balance target. Reduce the balance below that figure through Roth conversions before age 73.
- Rule 1: Start Roth conversions at retirement not age 70 — earlier is better
- Rule 2: Use QCDs for all charitable giving after age 70.5
- Rule 3: Never miss an RMD — set December 1 reminder without exception
- Rule 4: Withhold 20-30% from IRA distributions — default 10% is almost never enough
- Rule 5: Target IRA balance at age 73 that generates RMDs fitting within your preferred bracket
Apply the Rules to Your RMD Situation
Enter your balance and income to see how each rule applies to your specific retirement picture.